Hint: It’s in the billions…April 23, 2015 4:41
Ikea vs The One
How much do home furniture retailers Ikea and The One have in common, besides the fact that they've both been founded by Sweden-born entrepreneurs?
Established in Sweden in 1943 by Ingvar Kamprad, the Ikea brand now stands for a concept of “egalitarian lifestyle for the many people” based on “democratic design” available in 269 stores in 36 countries, annually visited by 410 million people. A lucrative concept indeed as the group generated over $29 billion in sales for the financial 2007. In 1983, the Swedish behemoth opened its first venue in the Middle East and now has five franchised stores in the region. The popularity of the brand, globally and regionally, is such that in 2004, two men were trampled to death and 16 shoppers were injured when 20,000 people rushed to claim $150 vouchers in a Saudi Arabia store.
Interestingly, The One’s founder, Swedish-born Thomas Lundgren worked for Ikea in the region until 1990. In 1994, allegedly inspired by an angel in a dream who dramatically commanded him to “save the world from all cheap, repetitive as well as over-priced home retailers [namely Ikea]”, Lundgren got investors to cough up a total $2.5 million in his own furniture retailer concept. A first outlet was opened in Abu Dhabi in 1996; in ten years, the iconoclastic entrepreneur built a brand that generates annual sales standing at $100 million in a network of 16 “theatres” in the Middle-East and Europe.
Basically, Ikea aims at providing costumers with whatever they might need in a one-stop shop: over 6,500 products are available at the Dubai Festival City store and various solutions are provided for every part of the house, from the bedroom to the kitchen or outside areas. All products, that bear detailed price tags, have distinctive Swedish names that relate to their function and origin. The well-known “flat-pack” packaging allows for easy self-transportation. The concept consisting in selling Scandinavian design on a global scale, products are very much the same all over the world. But in response to local market characteristics, the Middle East stores are developing a home consultancy service and are focusing on a more personalized relationship with costumers. Ikea also developed branded restaurants such as the Swedish Food market, again hailing Swedish culture, or the Exit Bistro offering quick meals at low prices.
Following its “be different” philosophy, The One’s ranges of furniture and accessories are collected in Europe, Asia, Africa and the Middle East with the intent to offer a mix of quality, class and eccentricity. Home styling and florists services are available and in order to provide a “total home experience” in its outlets, the brand also developed in-house restaurants and sells its own CDs (“Weast” sold more than 10,000 copies).
The Middle East is just one promising market among others for Ikea, whereas the Gulf countries are home to The One, which is now looking out for global expansion. Lundgren says he hopes to have 190 stores open worldwide by 2020 for his brand. But global expansion is still limited, for now, to two stores in Sweden and one in Riga, Latvia. Regionally, The One now has seven stores in the UAE, one in Bahrain, one in Jordan, two in Kuwait, and two in Qatar – a Saudi store closed in 2004.
Ikea took its first Middle Eastern step in Jeddah in 1983, soon following with Kuwait in 1984. But it’s only in 1991 that franchisee Al-Futtaim Group inked the first Ikea store in Dubai, which was moved twice before landing to the largest regional outlet of 35,000 square meters at Dubai Festival City in 2005. The Swedish brand now boasts two stores in Saudi Arabia, two in the UAE and one in Kuwait, and plans to open a couple of stores per year during the next five years, including in untapped Qatar with Al-Futtaim.
Identity is exactly where the two brands show major differences. Ikea made a worldwide reputation out of its “big on ideas, low on prices” concept by catering to its core client target, the family; dedicated play areas for children are often part of the venue. Enlisted solutions are provided, costumers are taken on a one-way roundabout around the shop, ending with a hot dog at the Exit Bistro.
The One’s Thomas Lundgren confronts head-on Ikea and hopes to “annoy competitors”. Hence a strategy mainly based on doing the exact opposite of everything Ikea does: if Ikea’s products are described as “low-priced and functional”, The One’s are repeatedly labeled “funky” and “sexy”.
Maverick Lundgren came up with a “masstige” notion, “the sweet spot between mass and prestige” he says, to attract a wide range of customers and budgets by offering an elitist and original kind of products. Similarly, Ikea stresses on its well-known self-serve and self-assemble concept, justified by the “We do our part, you do yours” policy, while The One made a point of going out of their way so costumers don’t have to.
Neither Ikea nor The One are overly fond of traditional advertising. Promotion happens through other channels: Ikea’s catalogue, that won a Gulf Marketing Review award in 2004, is the brand’s main marketing medium. Last September, the 2008 284-page catalogue has been delivered free of cost to no less than 650,000 UAE homes. Distributed in August/September, it is valid for a full year with prices guaranteed not to increase as long as the catalogue is valid.
On the other end of the spectrum, “retail rebel” The One doesn’t publish a catalogue and directly addresses the consumer with aggressive statements: “Are you a man or a lamb?” or “Mindless repetition is for parrots”. The UAE brand also pushes forward its proud middle-eastern origins with taglines such as “Things DO grow in the desert”. Underlining its playful approach, Lundgren labeled the One’s showrooms “theatres”, clients are “fans”, displays are “stage”, employees are “cast” and products are “props”.
Prices are obviously the main issue for brands that define themselves as suppliers of good quality, low-priced products. At Ikea, “we design the price tag first” they say. The whole production and selling process are designed to be the most cost-effective: buying in large volumes, flat-packed and self-transportation policies, etc. Ikea also provides a loyalty card that grants the holder benefits such as free home delivery and assembly, prizes, free meal at Ikea restaurant, etc.
The One’s price strategy is based on “never overcharging in the name of design” and while the prices are higher than Ikea (this is not flat-pack territory) promotions are given on every chance they get: for instance, on its 10th anniversary, the UAE brand gave away hundreds of products for Dhs10 a piece for a month.
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